Not a Lexis+ subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
Shortly before year-end, the Federal Reserve Board ("FRB") proposed several rules to manage systemic risks presented by bank holding companies with consolidated assets of $50 billion or more and by nonbank financial institutions that are designated as systemically important by the Financial Stability Oversight Council ("FSOC"). The proposed regulation (the "Proposal") would implement the mandatory portions of sections 165 and 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act").
The Proposal includes seven sets of requirements for the bank holding companies over the $50 billion mark and the (to-be-designated) systemically important nonbanks (collectively, the "covered companies"): (i) risk-based capital requirements and leverage limits,3 (ii) liquidity requirements, (iii) single-counterparty credit limits, (iv) risk management, (v) stress tests, (vi) the debt-to-equity ceiling, and (vii) early remediation. Portions of the risk management and stress test provisions extend to banking organizations with less than $50 billion but more than $10 billion in consolidated assets.
Highlights
As a whole, Proposal reflects a fair reading of the Act and provides a level of detail that is a two-edged sword. On the one hand, the details in the Proposal are helpful for a covered company to measure its compliance with enhanced prudential standards. On the other hand, the specifics in many of the new standards, including those relating to capital planning by nonbank covered companies, liquidity, restrictions on single-counterparty exposures, mandatory stress-testing, and early remediation, will compel all but the very largest bank holding companies to revisit their risk management systems to ensure that all of the particular requirements have been covered. Areas that warrant careful attention include:
In addition to these core issues, the Proposal discusses a few specific points that could have important operational consequences.
Please click on the Attachment: link at the top of the post to view or download the entire article
For more legal analysis in financial industry regulation, visit Morrison & Foerster LLP's online resources.
For more information about LexisNexis products and solutions connect with us through our corporate site.